Business Finance Project: Cost Classification, Reduction, Forecasting

Time constrained
project Business
Finance

Contents
INTRODUCTION......................................................................................................................3
TASK 1......................................................................................................................................3
Classify the costs according to its behaviour and explain the types of attributing indirect
costs........................................................................................................................................3
TASK 2......................................................................................................................................5
Discuss the cost reduction assessments and findings.............................................................5
TASK 3......................................................................................................................................6
Up to 30 April, 2023; prepare a 12-month forecast/budget for the business.........................6
TASK 4....................................................................................................................................10
Clear arguments are required to back up the evaluation with conclusions and suggestions.
..............................................................................................................................................10
CONCLUSION........................................................................................................................11
REFERENCES.........................................................................................................................12

INTRODUCTION
Any company's financial system is its backbone. It's practically impossible to succeed
without a sound financial foundation. The money and credit employed in a firm are referred
to as business finance. Any company's financial foundation is crucial. Funding is required to
purchase real estate, commodities, environmental assets, and other business-related assets.
Financial management can provide the tools needed to create deficit-reduction strategies
(Dent, Hoke and Panagiotopoulos, 2021). Dysonica is a huge international creative company
based in the United Kingdom that now has a global presence. Its products are available on the
town centre as well as on the internet. Due to competitive pressure, many price efforts have
been implemented, including the migration of operations from the United Kingdom.
TASK 1
Classify the costs according to its behaviour and explain the types of attributing indirect
costs.
Any expense incurred by a corporation in order to create or produce products and
services is referred to as a cost. It is the expenditure incurred on the sale and acquisition of a
business. In order to produce things, the company must incur both fixed and variable costs.
Fixed cost: It is a requirement that, regardless of the firm's size, will be included in the
expenses. During the production process, the corporation spends money on property tax, rent,
depreciation, and insurance.
Factory and storage rent: 18000 per month = 18000.00 * 12 = 216000.00
Insurance: 500 per month = 500.00 * 12 = 6000.00
Machinery: 1500 per month = 1500.00 * 12 = 18000.00
Office and sales staff: 9000.00 per month = 9000.00 * 12 = 18000.00
Variable Cost: Variable cost is determined by the firm's production, which is created by the
firm. It's feasible that a boost in production will lead to an increase in variable expenses as a
result of this. It includes commissions, raw materials, utility costs, and labour, all of which
contribute to the firm's variable cost increasing.
Direct labour: 17500.00 per month
Raw material: 15000.00
Semi variable cost: It is one that is made up of both variable and fixed expenses. These costs
are fixed at a specific level of output and thereafter vary based on the amount of output.

When no units are created, a predetermined amount is charged, known as fixed cost (De-
Ramon, Francis and Harris, 2021).
Utilities: 500 per month = 500.00 * 12 = 6000.00
Logistics cost: 3000.00 per month
Fixed Costs £ Variable Costs £ Semi-variable
Costs
£
Machinery 1500.00 Raw materials 15000.00 Utilities 500
Factory and
storage rent
18000.00 Direct labor 17500.00 Logistics 3000.00
Office and sales
staff
9000.00
Insurance 500.00
Total 29000.00 32500.00 3500.00
 Absorption costing: It is a costing method that considers all manufacturing costs. This
strategy is used by corporations to absorb the prices of its products. All these direct
and indirect charges are provided by the expenditures. Manufacturing means of
production are included in direct expenses (Kreiss and et.al., 2021). Production
leasing, administration costs, licencing, and maintenance are all examples of variable
expenses.
For example, let’s pretend ABC is a computer company. The information supplied
pertains to the manufacturing process. Profits are calculated using the absorption costing
approach. A total of 10,000 units were produced, with 9000 of them being sold. Each device
will cost $50 to purchase.
Direct labour cost = $5.00
direct material is $ 20.00
$ 5.00 in other variable costs
Overheads Fixed = $ 5.00
$ 30,000.00 in fixed costs
 Marginal Costing: This is a method of allocating variable manufacturing expenses to
products. It's the ratio of an increase in expenses to an increase in output. There are
two types of expenses in a product: fixed costs and variable costs. Regardless of
industrial production, fixed expenses remain constant. Variable costs, on the other
hand, fluctuate as a result of global manufacturing changes (Dhole and et.al., 2021).
Marginal cost per unit can be computed by the following formula:
Marginal cost = Change in cost / Change in Quantity